Sports TV rights cover financial bases

Smallscreen depends on timeshift-resistant broadcasting

When the baseball season begins this week in Southern California for Los Angeles’ Dodgers and Angels, both teams will be stepping to the plate with expensive new stars — for the Angels, on the field; for the Dodgers, in the owner’s box.

The Dodgers announced last week that the team will be sold to Guggenheim Partners, a group headed by former Los Angeles Lakers hall-of-famer Magic Johnson (and including Hollywood honcho Peter Guber), for an unprecedented $2 billion, more than twice the record sum the Chicago Cubs sold for just three years ago. A few months earlier, the Angels signed slugger Albert Pujols to a 10-year, $240 million deal, $56 million more than Angels owner Artie Moreno paid Disney for the entire team, the defending World Series champs at the time, in 2003.

The pricey new players in the war for the hearts of Los Angeles baseball fans are just another sign of the extent to which the TV biz, desperate for live, timeshift-resistant programming, has been driving up the rights to sports broadcasting. A recent report by Forbes on the spike in valuation of Major League Baseball teams placed the Angels eighth at $656 million, up 18% year-to-year (compared with an average 16% per-team rise). But that was chump change compared with the Dodgers spike, up an astounding 75% year-to-year, at $1.4 billion. That Johnson and Guggenheim didn’t bat an eyelash at paying a further $600,000 premium reflects the promise of the team’s next TV contract.

Fox’s current deal with the Dodgers runs through 2013, but the network has an exclusive 45-day period beginning in October of this year to negotiate an extension. Time Warner would love to steal the Dodgers’ rights away from Fox, as it did with basketball’s Los Angeles Lakers (in a reported 20-year, $3 billion deal).

Fox wouldn’t comment on the negotiations, but wants to keep both baseball teams in the local programming fold, says Steve Simpson, senior VP and general manager for Fox Sports West/Prime Ticket.

Many speculate the rise in valuation is also due to the prospect of developing an owned-and-operated regional sports network, similar to the YES network owned by the Yankees, and NESN, owned by the Boston Red Sox, the No. 3-valued team on Forbes’ list.

But the Pujols deal also represents a significant move in the battle for a key baseball demographic in Los Angeles: Latinos. It’s a strategy Moreno has used before, signing the top free agent Latino player of an earlier generation, Vladimir Guerrero, to a $70 million, five-year deal starting in the 2004 season, while at the same time aiming to broaden the team’s marketing base by changing its name from Anaheim Angels to Los Angeles Angels of Anaheim, after a protracted legal battle with the Orange County city.

“Artie’s vision was to make us a big-market ballclub,” says vice president of marketing and communications Tim Mead, who is in his 33rd season with the Angels. “Television is certainly part of that. I remember the days when we showed 50, 60 games. Now every game is on TV. We have a tremendous business partner in Fox.”

Indeed, Fox Sports Networks recently announced an expansion of its Spanish-language telecasts of Angels and Dodgers games (as well as those for Los Angeles Clippers basketball games).

But the Dodgers aren’t exactly sitting on their manos when it comes to its own Latino following.

“We look at the Latino/Hispanic fan base as part of a general marketing plan. They’re our dominant and most loyal fan base,” says Michael Young, chief revenue officer of the Dodgers, who also point to the Asian market as one in which the team’s popularity is growing.

In the ratings race, the Angels and Dodgers were in a relative dead heat during the 2011 season. Each averaged a 1.1 rating for telecasts on local Fox nets. That represented a year-over-year dip for the Angels of 5.8%, and a freefall of 30.1% for the Dodgers, due to fan disaffection with former owner Frank McCourt, which also drove attendance at games to its lowest level in more than a decade.

But with sports programming showing the ability to play to a live viewership that won’t zap ads, as well as over-delivering the hard-to-reach young male audience, simple ratings don’t tell the whole story.

Tim Murphy, president of Siltanen & Partners Advertising, which is headquartered in El Segundo, says his company’s clients, which include Suzuki, Gateway computers, Quiznos and EA Sports, find baseball a particularly good fit for their products. He adds that nature of the live event figures into the company’s advertising strategy.

“We have designed specific campaigns for baseball to reach fans across several innings in a row, from the beginning to the end of game,” he says.

Ideally, in a virtuous cycle, the more money the Angels and Dodgers have at their disposal through television deals, the more they can spend on players, which could translate into more on-field success, which then would lure more viewers and bring more money to the networks.

Yet Young points out that since TV viewership of baseball in general is in decline because of fragmentation of audience and because there are so many platforms out there, the Dodgers must be committed to developing methods to attract viewers.

“We have to keep trying to figure out new ways to drive viewership through social media and interactive media during broadcasts,” Young explains. “We can’t just remain with the status quo as far as how baseball games are produced. You have to introduce interactive elements, especially with the younger demographic.”

Baseball has been considered an innovator in digital rights, though the league bargains collectively in such negotiations.

Often the Dodgers and Angels are seen as two distinct baseball camps, with no crossover between them. But A.J. Maestas, president of Chicago-based Navigate Research, says there’s more fan overlap than meets the eye.

“The average (person) might think Angels fans hate the Dodgers,” Maestas says. “But the Dodgers have the longer legacy. There will be overlap. The Yankees and Mets have it, too, believe it or not.”

Research conducted by Navigate shows that 3.7 million adults in the L.A. market either watch or listen to Angels games, whereas 4.7 million adults in L.A. either watch or listen to Dodgers games. Of those, 37.6% of Angels fans consider themselves “very” interested in Major League Baseball overall, while 33.7% of Dodgers fans made that same claim.

“Among passionate fans, there are distinct factions,” Maestas explains. “But when it comes to TV ratings, casuals is a larger group. Most of the overlap is from those casual fans.”

Gil Pagovich, of Maxximum Marketing, says that while the Angels’ signing of Pujols — as well as pitcher C.J. Wilson from rival Texas — will help the team recover the mojo it lost in failing to sign other top free agents in recent years, the deal won’t necessarily adversely affect the longer-standing team in town.

“I don’t think it hurts the Dodgers,” Pagovich says. “They’re a legitimate, credible brand. At the end of the day, the Dodgers are one of the great franchises in sports. They have a great fan base around the country. They’re the Yankees of their market, as (Dodgers manager) Don Mattingly said.”